Even though the year is nearly over, December still offers valuable opportunities to lower your 2025 tax bill. By acting before December 31, you may be able to meaningfully reduce your taxable income. Consider implementing one or more of the following year-end strategies.
Defer Income and Accelerate Deductions
One of the most common year-end tax strategies is shifting taxable income into the following year while pulling deductible expenses into the current year.
Delay Income Where Possible
If you expect to receive a year-end bonus, ask your employer whether it can be paid in January instead. Self-employed individuals can delay issuing invoices until the new year so payments — and the associated taxable income — fall into 2026.
Prepay Deductible Expenses
If you itemize deductions, you generally deduct expenses in the year they’re paid. Consider:
- Paying your January 2026 mortgage payment in December to deduct the interest on your 2025 return.
- Paying your 2026 property tax assessment by December 31 (subject to state and local tax deduction limits) to claim it this year.
Important Considerations
This strategy isn’t always beneficial. Avoid shifting income to the next year if you anticipate moving into a higher tax bracket. Also, business owners eligible for the qualified business income (QBI) deduction should consider how accelerating deductions or deferring income might affect it.
Harvest Investment Losses
Selling investments at a loss can be a smart planning tool when done before the end of the year.
Offset Capital Gains
Realized capital losses can offset capital gains on a dollar-for-dollar basis. If you sell losing investments in 2025, you can use those losses to neutralize gains realized this year.
Reduce Ordinary Income
If losses exceed gains, you can generally deduct up to $3,000 of the excess against your ordinary income ($1,500 if married filing separately). Any remaining unused losses carry forward to future years.
Donate Appreciated Stock to Charity
If charitable giving is part of your year-end strategy, consider donating appreciated publicly traded stock rather than cash.
Why Stock Donations Save More
By donating appreciated shares:
- You can claim a deduction for the full fair market value (if you itemize), and
- You avoid capital gains tax you would owe if you sold the stock.
When Not to Donate Stock
Do not donate stock that has declined in value. Instead:
- Sell the shares so you can claim the capital loss, and
- Donate the cash proceeds to the charity to claim the charitable deduction.
This two-part process typically results in a better tax outcome.
Maximize Retirement Contributions
Contributing to tax-deferred retirement accounts is a powerful way to reduce taxable income for 2025.
Contribution Limits for 2025
- 401(k): Up to $23,500
- SIMPLE plans: Up to $16,500
- IRA: Up to $7,000 (deductibility may vary if you or your spouse participate in a workplace plan)
- SEP IRA: Up to 25% of net income, capped at $70,000
Catch-Up Contributions
For those age 50 or older by December 31:
- 401(k): +$7,500
- SIMPLE: +$3,500
- IRA: +$1,000
For individuals age 60–63:
- Additional 401(k) catch-up: up to $3,750
- Additional SIMPLE catch-up: up to $1,750
Deadlines to Know
- 401(k) & SIMPLE contributions: Generally due by December 31, 2025
- IRA contributions: May be made until April 15, 2026
- SEP contributions: May be made until the extended filing deadline (October 15, 2026)
If you want to increase payroll deferrals for 2025, check with your employer’s plan to see if adjustments are still allowed before year-end.
Act Soon
Many of these tax-saving strategies must be completed by December 31 to impact your 2025 tax return. If you’re unsure which options apply to your situation, reach out for guidance. Acting now can help you take full advantage of the remaining opportunities to reduce your tax burden.
© 2025